Brazil inflation seen up in July, but relief ahead

BRASILIA Aug 8 (Reuters) - Brazil's inflation rate likely
inched higher in July compared to the previous month, but eased
from mid-July as a surge in food prices started to ebb, a
Reuters poll showed.

Consumer prices as measured by the benchmark IPCA index
probably rose 0.45 percent in July, up from 0.35
percent in June, according to the median of 17 forecasts ranging
from 0.38 to 0.51 percent.

The result would be lower than the 0.54 percent increase
recorded in the month to mid-July after a sharp rise in food
prices, mainly for rice and beans, which are staple food items.

The annual inflation rate probably fell to 8.66 percent from
8.80 percent in June, but still remains well above the 4.5
percent center of the official target range.

"That monthly relief stems from less pressure coming from
food prices, reinforcing our expectation for a slowdown in
inflation in the second half of the year," economists with Sao
Paulo-based bank Bradesco said in a research note.

Higher-than-expected inflation results this year have forced
the central bank to keep its benchmark Selic rate near 10-year
highs even as the country struggles with a crippling recession
now in its second year.

High interest rates and growing expectation for the approval
of austerity measures under interim President Michel Temer have
recently dragged down inflation expectations for this year and
next. Less government spending and more expensive credit lead to
lower consumption and inflation expectations.

Temer, who replaced President Dilma Rousseff while she faces
an impeachment trial over accusations of doctoring government
accounts, has vowed to limit public spending and overhaul the
country's generous pension system.

Economists forecast inflation will ease to 7.20 percent this
year, according to a weekly central bank poll published Monday.

The survey forecasts an even sharper drop for next year,
with inflation at 5.14 percent. In April, the inflation
forecasts for 2017 stood at 6 percent.
(Reporting by Alonso Soto; Editing by James Dalgleish)